The productivity advantages of large cities: Distinguishing agglomeration from firm selection

Pierre-Philippe Combes, Gilles Duranton, Laurent Gobillon, Diego Puga and Sébastien Roux ()

No 2009-02, Working Papers from Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales

Abstract: Firms are more productive on average in larger cities. Two explanations have been offered: agglomeration economies (larger cities promote interactions that increase productivity) and firm selection (larger cities toughen competition allowing only the most productive to survive). To distinguish between them, we nest a generalised version of a tractable firm selection model and a standard model of agglomeration. Stronger selection in larger cities left-truncates the productivity distribution whereas stronger agglomeration right-shifts and dilates the distribution. We assess the relative importance of agglomeration and firm selection using French establishment-level data and a new quantile approach. Spatial productivity differences in France are mostly explained by agglomeration.

Keywords: agglomeration; firm selection; productivity, cities (search for similar items in EconPapers)
JEL-codes: C52 D24 R12 (search for similar items in EconPapers)
Date: 2009-02-20, Revised 2010-11-30
New Economics Papers: this item is included in nep-eff, nep-geo and nep-ure
Note: This paper is included in the IMDEA Social Sciences Working Paper Series through the PROCIUDAD-CM and the Bank of Spain Excellence Programmes
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Citations: View citations in EconPapers (17)

Forthcoming in Econometrica

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Related works:
Journal Article: The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection (2012)
Working Paper: The productivity advantages of large cities: distingushing agglomeration from firm selection (2012)
Working Paper: The productivity advantages of large cities: distingushing agglomeration from firm selection (2012)
Working Paper: The Productivity Advantages of Large Cities: Distinguishing Agglomeration from Firm Selection (2012)
Working Paper: The Productivity Advantages of Large Cities: Distinguishing Agglomeration from Firm Selection (2009)
Working Paper: The productivity advantages of large cities: Distinguishing agglomeration from firm selection (2009)
Working Paper: The Productivity Advantages of Large Cities: Distinguishing Agglomeration from Firm Selection (2009)
Working Paper: The productivity advantages of large cities: Distinguishing agglomeration from firm selection (2009)
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